Can You Become a Millionaire Earning $30,000 a Year?

Can you become a millionaire if you only earn
$30,000 per year?
Yes, absolutely. Here’s how.
Start Investing Early
At age 25, you begin earning $30,000 annually.
That’s an income of $2,500 per month, before
taxes and deductions.
You save $458.33 per month, and spend the other
$2,000. (Remember, this is a savings rate of less
than 20 percent of your gross income).
Your savings of $458.33 per month amounts to
$5,500 per year.
You put that money in a Roth individual
retirement account, also known as a Roth IRA.
($5,500 is the maximum that you’re allowed to
contribute to a Roth IRA per year, based on 2013
rules. Learn more about Roth IRA’ s here.)
You put the money into a passively - managed index
fund that tracks the Dow Jones Industrial Average.
There's Nothing Fancy About it
In other words, you’re not doing any fancy,
advanced investing. You’re not day-trading or
stock-picking or betting on the Next Big Thing.
You're not flipping houses or starting companies or
buying Apple stock.
You're not doing anything sophisticated or time-
consuming or risky. You’re just tracking the broad,
overall market through a low-fee index fund: the
simplest type of investing that you can do.
You don’t touch your money. You never withdraw
it. You just let it sit there, reinvesting its own
dividends, and enjoying the power of compound
interest.
Your money grows at 7 percent annually. Guess
what? Within 38 years, by the time you’re 63,
you’ll have a nest egg of $1 million.
Can you believe that? By saving only $458 per
month -- which is the amount that some people
spend on their car payment -- you can grow a
million-dollar nest egg by the time you retire.
Stepping Up Your Savings
Okay, what if you earn $40,000 per year? Can you
bump up your savings a bit more, and start putting
aside $600 per month?
If you do, you’ll shave 3 years off the amount of
time it takes you to become a millionaire. Rather
than becoming a millionaire in 37 years, you’ll
reach your goal in 34 years. That means you can
celebrate your 60th birthday, millionaire-style, if
you start when you’re 25. Not only will you retire
as a millionaire, you'll also potentially be able to
retire early!
At $600 per month, you’re saving only 18 percent
of your gross income. If you can bump your
savings rate up by another 2 percent -- to a rate of
$667 per month -- you’ll shave yet another two
years off your timeline. You’ll be a millionaire by
age 58 if you start at 25.
Isn’t it stunning what a small bump in your
savings rate -- just an extra $60 or $70 per month
-- can do?
This effect is the result of compound interest,
which is the term that describes your interest and
gains accumulating its own interest.
The longer you stay invested, the more compound
interest works on your behalf. That’s why its a
great idea to start saving for retirement when
you’re young.
Source: CNN Money Millionaire Calculator